STP Implementation in STO A case study

How IT services in STO reduces risk, cost & provide better client experience by automation? How STP manage trade throughout its lifecycle?

STO : Securities Trading Organisation STP : Straight Through Processing COPYRIGHT 2011 SAPIENT CORPORATION

Akshaya Pandey Rajeev Kumar Jaideep Datta

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What we will do during this Presentation?

Setting Expectation of Presentation Understand Trading Brief introduction of STO and its Department. Understanding of STP (Straight Through Processing) Benefit of STP How an individual could fit into System? Real implementation of STP Technologies used to implement STP Question Answers

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Security Trading
What is Security?
Securities are equities or debt (debentures) of publicly traded companies that are bought and sold through brokerage firms.

How Trading Happens Today?

Trading happens today using ECN(Electronic Communication Network),an automated system that matches buy and sell orders for securities. display the best available bid and ask quotes from multiple market participants, then automatically match and execute orders. They not only facilitate trading on major exchanges during market hours, they are also used for after-hours trading and foreign currency trading

What is Trading?
Trading securities is the act of buying and selling securities with the intention of making profit. Brokerage firms and investment advisers recommend buying securities for the anticipated long-term appreciation of the company. Trading securities involve the same stocks and bonds available to all investors on public exchanges.

How trading happens in past?

Trading happens in past using Open outcry. This was a method of communication between professionals on a stock exchange. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.
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STO Securities Trading Organisation

Departments in STO
Static Data Reconciliation Compliance Treasury Accounting Research Risk Management Internal Audit Information Technology

IT Supported business area in STO

Static Data Order Management Trading Settlement Risk Management Reconciliation

Challenges Faced by Industry

Operational Risks - Scalability - Manual Errors - Non Standard Techniques - Data Mismatch Settlement Risk - Delays in Delivery/Non Delivery Competitive Pressures - Uneven Trade Volumes - Cost - Time Consuming

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STP Straight Through Processing

STP can be seen as a way of security transaction
THE TRADE LIFECYCLE
Trade Execution Trade Capture (Front Office)

processing system characterized by seamless automated communication among parties (as against sequential, manual exchange of information), real Trading time processing (as against batch processing), and Activities virtual processing (as against physical processing). The key to STP is that a single system is used for the entire processing. Global experience shows that a major disadvantage of using multiple systems is nonsynchronization of data between different links in the processing chain. Internal STP relates to the trade and settlement processes that are internal to an industry participant. On the other hand, the external STP is about connecting seamlessly to all external partners in the trading and settlement process including the industry-matching utilities. Many companies are able to appreciate that STP would lead to high operational efficiency and Operational increased trade volumes arising out of reduced risk Activities and fewer trade failures. It is strongly recommend that the companies should also look at standardizing STP to achieve the ancillary growth parameters. The benefits associated with STP standardizing could lead to increased cross-border trading and greater transparency with clear audit trail.

Trade Capture (Back Office) Trade Enrichment Trade Validation Trade Agreement Transection Reporting Settlement Instruction The Role of Custodian Settlement Instruction Status Settlement Failure Trade Settlement Reflecting Records Internally

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Straight Through Processing

STP is an objective to manage the trade throughout its entire lifecycle with minimal human intervention.

How STP helps?

Minimize Human Intervention Lower operational risk. Lower business dependency on human resource. Trade validation done efficiently reduces irregularity in P/L of STO Scalable Lowers Costs once system is in Place Reduces Time to Process Ability to Handle Variable Volumes Ability to generate Reports/Messages in Different Format Settlement done in less time and high accuracy. All above is required for better client Experience.

Skills Required to create a IT solution

Understand Business Need (Business Analyst) Interpret business need to fit into IT solution (Solution Architect) Plan & Manage the project within agreed time & budget (Program Manager) Develop or adapt the software to meet business need (Developer & QA) Support / Resolve on-going project (Support Analyst)

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Solution-Implementations

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Solution-Implementations-Technologies Used

Technologies/Methodology Used Environment Technologies Language Windows, Unix/Linux, As400 Java, Oracle/Sybase, Sell Scripts, .Net, XML, C++, CORBA Messaging Queue/WebSphere Message Broker (MQ/ESB), Informatica, Control-M/Auto-Sys, Apache Camel, Crystal Report, Golden Gate

Tools

Development Management Supporting

Subversion, JIRA, Share Point, Confluence, Crucible, Team City, Urban Deployment Eclipse, Altova Xml-Spy, TOAD
Apache Tomcat, WebSphere, Weblogic, As400 Synchronous, Asynchronous, Batch MQ, File, Socket, http (SOAP, Servlet, etc) Point-to-Point, Publish Subscribe FPML,FIX,SWIFT, etc Agile, Waterfall, Scrum,Extreme Programing(XP),TDD,etc Functional Point, Wideband Delphi,etc
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Servers Style Communication Protocol End Point Markup Development Estimation

Methodology

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Question Answers

!Thank You!
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